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Adjustable Product Attributes, Indirect Network Effects, and Subsidy Design: The Case of Electric Vehicles

Author

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  • Kevin Remmy

Abstract

This paper develops a structural model of endogenous product attribute choice in the presence of indirect network effects to study electric vehicle (EV) subsidies. Using data on the German EV market from 2012-2018, I find that a support scheme increased EV sales by 98% but led to strong range distortions. When designing subsidies, these distortions create a trade-off between optimizing different policy objectives. Large purchase subsidies maximize EV sales whereas large charging station subsidies maximize consumer and total surplus. The results suggest that policymakers should carefully weigh the benefits of increasing EV sales against the distortions this causes.

Suggested Citation

  • Kevin Remmy, 2022. "Adjustable Product Attributes, Indirect Network Effects, and Subsidy Design: The Case of Electric Vehicles," CRC TR 224 Discussion Paper Series crctr224_2022_335, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2022_335
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp335
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    Citations

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    Cited by:

    1. Fournel, Jean-François, 2023. "Electric Vehicle Subsidies: Cost-Effectiveness and Emission Reductions," TSE Working Papers 23-1465, Toulouse School of Economics (TSE).
    2. Zunian Luo, 2022. "Powering Up a Slow Charging Market: How Do Government Subsidies Affect Charging Station Supply?," Papers 2210.14908, arXiv.org, revised Jan 2023.
    3. Peter Haan & Adrián Santonja & Aleksandar Zaklan, 2023. "Effectiveness and Heterogeneous Effects of Purchase Grants for Electric Vehicles," Discussion Papers of DIW Berlin 2032, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    network externalities; product attribute choice; elctric vehicles; subsidies;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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